This blog is hosted on Ideas on EuropeIdeas on Europe Avatar

Could green hydrogen save jobs at Bridgend and Scunthorpe? Only if the UK rejoins the EU ETS.

On 7th June 2019 the website WalesOnline reported that the Ford engine plant at Bridgend in Wales is due to close next year with a loss of 1,700 jobs. Many of the engineering jobs at the plant are highly skilled and well paid, so their loss will have a devastating effect on the local economy. The article by Estel Farell-Roig in WalesOnline said:

“And for whatever reason, it [Ford] has not chosen to invest in Bridgend to make the engines those electric cars will need in south Wales. With demand for Bridgend’s petrol engines plummeting, Ford is shutting the plant. The much-scaled-back number of the dragon engines Ford had been planning to make there from 2020, just 125,00-a-year at the last estimate, will now be made in Mexico.”

The hydrogen fuel cell manufacturer Symbio could be the ideal business partner or investor, if the engine plant at Bridgend is to be saved and run by a new owner. Symbio – which is owned by the Michelin Group – designs hydrogen cell modules that can be used in different types of electric vehicles such as utility vehicles, buses, heavy-goods vehicles and boats etc. Hydrogen fuel cell electric vehicles are like battery powered vehicles in that they have zero emissions of green house gases. However hydrogen vehicles have the advantage over battery vehicles, in that the hydrogen refuelling time is faster than recharging a battery.

Symbio is supported by the Fuel Cells and Hydrogen Joint Undertaking (FCHJU). The FCHJU is a public private partnership that supports research and development projects involving hydrogen energy technologies in Europe. The FCHJU also supports the market introduction of these clean energy technologies, which will improve air quality in cities and reduce green house gas emissions as traditional combustion engines are phased out.

One of the FCHJU’s most ambitious projects is H2FUTURE, which has the potential to transform heavy industry through the use of green hydrogen. The aim of the project is to decarbonize the steel industry, so hydrogen produced by electrolysis from renewable energy sources can be used instead of coke and coal in the steel making process. The EU as the public partner of FCHJU is providing €18 million in funding for a pilot project at the Voestalpine steel works in Linz, Austria. The project involves the construction of a 6 megawatt electrolyser built by Siemens. Acccording to a press release on FCHJU’s website the plant was scheduled to be fully operational by spring 2019.

About two weeks before the announcement of the closure of the Ford engine plant at Bridgend, British Steel’s steel works at Scunthorpe went into receivership. Unless a new owner of the steel works can be found 5000 workers will be made redundant from the plant. When one takes into account those jobs in the supply chain dependant upon the plant, between 12,000 and 25,000 jobs could go as a result of the closure of British Steel. As with the closure of the factory at Bridgend, the jobs are highly skilled and well paid, and their loss will have a devastating effect on the local economy.

It is vital that the steel works at Scunthorpe is kept open, as it makes a variety of quality steel products, including the steel rails used by Network Rail and therefore an important supplier to the infrastructure of public transport in the UK. Likewise the steel works could play its part in building the metal infrastructure for the new hydrogen refuelling stations, that will be needed to refuel the new hydrogen fuel cell electric vehicles that will be on our roads.

There are two reasons why the FCHJU could have an interest in the survival of the steel works in Scunthorpe: the first as already mentioned is the plant could supply some of the hardware for the hydrogen refuelling stations; the second is that Scuthorpe could participate in the H2FUTURE project alongside the pilot project in Austria.

At the moment the Sheffield based clean energy company ITM Power is building a 10 megawatt electrolysis plant at Shell’s Rheinland Refinery at Wesseling in Germany. Hydrogen at the plant will be produced from electricity from renewable sources rather than from natural gas, thus reducing CO2 emissions at the site. This project referred to as Refyne is a partnership between ITM Power, SINTEF, thinkstep, and Element Energy, which the FCHJU has funded with €10 million. The experience that ITM Power has gained on this large scale energy project, would make it an ideal partner to work with the Scunthorpe steel works, on a project to introduce green hydrogen into the production process of steel. However, first of all a new owner of the British Steel plant needs to be found to save it from closure.

According to an article by Jamie Macaskill that appeared on the website GrimsbyLive of 15th May 2019 entitled: ‘How British Steel in Scunthorpe ended up facing a catastrophic closure – as hope grows help is on the way’, the biggest problem facing the Scunthorpe steel works was:

“British Steel risked being fined £500 million for breaching EU laws designed to reduce carbon emissions, as well as a bill for more than £100m to buy new ‘allowances’ to let it continue operating what is essentially a polluting business which contributes to greenhouse gases.”

Two factors have caused the recent financial difficulties at British Steel: firstly the private equity company Greybull Capital – that managed British Steel from 2016 until it was put into administration in May 2019 – was given free allowances which it sold for a profit, before they could be offset against greenhouse gas emissions produced by the steel works in accordance with the EU’s Emissions Trading System (EU ETS); secondly as a result of Brexit the UK is no longer a member of the EU ETS.

Whatever the outcome of the Brexit process, if British Steel is to find a new buyer and keep its access to the European market without paying huge fines and tariffs, the UK must rejoin the EU ETS. The EU ETS was set up by the European Union in 2005 to reduce the emissions of greenhouse gases such as carbon dioxide (CO2), nitrous oxide (N2O), and perfluorocarbons (PFCs), which are responsible for global warming and causing climate change.

The EU ETS normally has 31 member countries consisting of 28 EU Member States (although that number is now 27 as the UK is no longer a member of EU ETS because of Brexit) plus Iceland, Leichtenstein, and Norway. The EU ETS regulates greenhouse gas emissions from the following industries: oil refineries, steel works and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals, and civil aviation. According to the European Commission’s factsheet on EU ETS:

“By putting a price on carbon and thereby giving a financial value to each tonne of emissions saved, the EU ETS has placed climate change on the agenda of company boards across Europe. Pricing carbon also promotes investment in clean, low-carbon technologies.”

On 1st May 2019 GrimsbyLive reported in an article entitled: ‘Emergency £120m British Steel loan is vote of confidence in Scunthorpe’, that the British Government had lent British Steel £120 million to pay for the company’s carbon emissions bill for 2018. The article by Jamie Waller went on to say:

“Businesses should have been awarded their permits in March but British companies have been frozen out from this year’s allocation, covering more than £2 billion of allowances, of which Scunthorpe-based British Steel is said to account for around five per cent.”

The consequences of the UK leaving the EU ETS go beyond British Steel, effecting the whole of heavy industry and the energy sector in the UK. EU ETS recognizes that heavy industry and the energy sector still require fossil fuels such as oil, natural gas, and coal to function, which is why these industries are given allowances that are capped under the scheme. If a company that is a heavy polluter needs to buy additional allowances, because its greenhouse gas emissions are greater than the cap set by the EU ETS, then it can purchase its allowances either at auction or from another company that has surplus allowances to sell. The company from which the polluter buys the surplus allowances may not be a burner of fossil fuels at all – such as a renewable energy company that gets its electricity from wind, tidal or solar power, or a company using hydrogen produced by electolysis to store energy from renewable sources – therefore it has a surplus of allowances.

The EU ETS creates the incentive for the heavy polluter to reduce its CO2 emissions by making its plant more efficient so it consumes less fossil fuel, or by investing in other companies in the geen energy sector. The purpose of EU ETS is to reduce greenhouse gas emissions to net-zero by 2050 in accordance with international treaties to reduce global warming which is causing climate change.

As the UK has left EU ETS it will lead to less funding of the green energy sector in the UK, and threaten thousands of jobs in this new high tech industry. Both the engine plant in Bridgend and the steel works in Scunthorpe could easily find new buyers, if they were involved in FCHJU projects, which are part of the green hydrogen revolution replacing oil, coal, and natural gas as a fuel. However, the revival of British industry through the energy transition can only take place if the UK rejoins the EU ETS.

Sources

https://www.symbio.one/en/about-symbio/

https://www.walesonline.co.uk/news/wales-news/living-fear-uncertainty-bridgends-ford-16392016

https://www.gasworld.com/exclusive-interview-with-fch-ju/2017185.article?

https://www.voestalpine.com/group/en/media/press-releases/2018-04-16-H2FUTURE-on-track-construction-starts-at-the-worlds-largest-hydrogen-pilot-facility/

https://www.fch.europa.eu/news/hydrogen-roadmap-europe-sustainable-pathway-european-energy-transition

https://www.fch.europa.eu/news/project-h2future-construction-starts-worlds-largest-hydrogen-pilot-facility

http://www.itm-power.com/project/refhyne

Davis, Rob. (26th May 2019) “Should the government step in to save stricken British Steel?” The Observer

https://www.grimsbytelegraph.co.uk/news/local-news/british-steel-scunthorpe-news-background-2869097

https://ec.europa.eu/clima/sites/clima/files/factsheet_ets_en.pdf

https://unionregistry.ec.europa.eu/euregistry/GB/index.xhtml

©Jolyon Gumbrell 2019



Leave a Reply

Your email address will not be published. Required fields are marked *

*

*

UACES and Ideas on Europe do not take responsibility for opinions expressed in articles on blogs hosted on Ideas on Europe. All opinions are those of the contributing authors.